Madoff trustee seeks $1 billion from Mets owners

By Ben Rooney, staff reporterMarch 18, 2011: 7:12 PM ET

NEW YORK (CNNMoney) -- The court-appointed trustee in the Bernard Madoff Ponzi case is now seeking to recover $1 billion from the owners of the New York Mets baseball team, alleging a much deeper relationship than had been previously disclosed.

Irving Picard, the trustee appointed by a federal bankruptcy court, had previously accused Fred Wilpon and Saul Katz of reaping $300 million in fictitious profits from their dealings with Bernard L. Madoff Investment Securities.

But in amended court documents filed Friday, the trustee charges that Sterling Equities, the Wilpon and Katz family business, received an additional $700 million in fraudulent transfers.

Picard's complaint alleges that Wilpon and Katz knew that Madoff was dishonest in his investment advisory business, and that his investment returns were "too good to be true."

But Wilpon and Katz had a "deep dependency" on the continuation of the Madoff fraud, according to David Sheehan, a lawyer for the Trustee and a partner at Baker & Hostetler LLP.

In one example of the close relationship between Sterling Equities and Madoff, the complaint says Wilpon and Katz accepted an interest- and cost-free $54 million loan from Madoff to pay Cablevision for the broadcast rights for the New York Mets.

According to Picard, the loan was documented by a fraudulent letter that described it as an "investment" by Madoff's wife, Ruth.

The complaint says Wilpon and Katz received fraudulent transfers from Madoff during a six-year period before the Trustee began liquidating Madoff's investment firm in December 2008. It also charges that Wilpon and Katz received "preferential transfers" in a three-month period after the liquidation proceedings started.

Sterling Equities are also charged with restructuring millions of dollars in debt at banks including Bank of America (BAC, Fortune 500), JPMorgan (JPM, Fortune 500), Citibank (C, Fortune 500) and others to "circumvent any potential recovery action initiated by the Trustee," according to the complaint.

"The restructuring demonstrates both Sterling's and the Lender Banks' serious concerns regarding potential recoveries by the Trustee and supports the Trustee's contention that the Sterling Defendants were inextricably bound to the Madoff fraud," said Fernando Bohorquez, a lawyer for the Trustee at Baker & Hostetler LLP.

In a statement, Wilpon and Katz denied the allegations and pledged to fight the charges.

"The amended complaint is the latest chapter in the work of fiction created by the Trustee," according to the joint statement. "We will pursue a vigorous legal defense that will set the record straight and vindicate us."

David Cohen, general counsel for the New York Mets, said the team never used the $54 million loan mentioned in the complaint. He called the allegations "more nonsense from the Trustee."

"The $54 million represented funds the Sterling partners had invested with Madoff, as the Trustee acknowledges," Cohen said in a statement. "As the Trustee also acknowledges, that money was never used -- and in fact was returned the next day -- because the necessary funds were received from Sterling's lenders by the buyout deadline, and were used to fund the buyout."

Madoff pleaded guilty in March 2009 to running the largest, most sweeping Ponzi scheme in U.S. history. He is currently serving a 150-year sentence at a medium security federal prison in Butner, N.C.

Madoff was a Mets fan. His satin Mets jacket, emblazoned with his name on the back, was once of his many possessions and properties seized by the U.S. Marshals to compensate victims. The jacket went for $14,500 at auction.